Basis period reform - HMRC sets deadline for requesting overlap profit information
As the submission deadline for 2023/24 tax returns approaches, we look at the latest position on how to find out information on overlap profits for basis period reform.
We continue to have dialogue with ICAS members as they deal with the practical aspects of basis period reform for their practice and their clients. Basis period reform will have an impact on clients who have an unincorporated business with an accounting year other than 5 April or 31 March and this will affect tax returns for the 2023/24 tax year.
In many cases, the key practical challenge is determining what figure can be deducted for overlap relief as the unincorporated business moves from the ‘current year basis’ to a tax year basis for allocating taxable profits/losses to tax years. While overlap relief profits should strictly have been recorded on the tax return being submitted each year, this is very often not the case in reality, particularly where the client has changed accountant, or the information is not held on the client’s permanent files.
New HMRC guidance
To assist with the calculation of overlap profits information, HMRC has published some new guidance on how to work out the overlap relief figure. This goes alongside the existing overlap relief guidance on the HMRC website.
Requesting overlap information from HMRC
As the 31 January 2025 deadline for the submission of 2023/24 tax returns approaches, more agents are using HMRC’s G-form to request information about a client’s overlap profit figure and the feedback we continue to receive from members is generally positive. While requests have typically taken a couple of weeks to turn around, this is starting to increase and you can find an estimated date of response by using the “Check when you can expect a reply from HMRC” facility and entering the date that you submitted the G-form.
As expected, HMRC has now set a deadline of 31 December 2024 for the submission of G-form requests in order to ensure that a response can be received ahead of the 31 January 2025 submission deadline for 2023/24 tax returns. While the G-form will continue to be available in January, HMRC cannot guarantee that it will be able to respond ahead of 31 January 2025 so it may be necessary to submit a tax return where the overlap information is not known with estimated figures.
It's important to remember that it is better to submit a return with estimated figures than to submit a return late, in order to avoid a late filing penalty for submitting the 2023/24 tax return late. The estimated details can then be updated once the correct information is known.
Submitting requests for overlap relief as soon as possible will help ensure that you can receive the correct information for your client at the earliest opportunity.
Let us know your views
Please let us know how basis period reform is impacting your practice and your clients.
We welcome your views more generally, which help inform our work on consultations or other tax-related matters. ICAS responds to many tax calls for evidence and consultations, as well as producing tax policy papers and reports. We also regularly attend meetings with HMRC at which service levels, delays and other issues are discussed, and we raise problems being encountered by members.
Please email tax@icas.com to share your insights and feedback.
